From Australia, to Asia and Europe and the United States on Wednesday, the message in the latest economic reports was clear: manufacturing continued to slump amid the worst slowdown since the Great Depression.

In the United States on Friday, a crucial measure of manufacturing activity fell to the lowest level in 28 years in December. The Institute for Supply Management, a trade group of purchasing executives, said its manufacturing index was 32.4 in December down from 36.2 in November.

“Manufacturing activity continued to decline at a rapid rate during the month of December,” said Norbert J. Ore, chairman of the Institute for Supply Management Manufacturing Business Survey Committee. This index was at the lowest reading since June 1980 when it was 30.3 percent.

“This report indicates that the U.S. economy was on even weaker footing than commonly believed as 2008 came to a close,” said Joshua Shapiro, chief United States economist at MFR. “Moreover, the signal from the export orders index is that the rest of the world is right there with us. Hardly a signal for economic recovery anytime soon.”

This is the sort of thing that kept me out of the market for the last several years. This is beyond the whole "buy the rumor/sell the fact" stuff you regularly see. For years, stocks have been responding positively to bad news for the underlying economy and negatively to good news on the economic fundamentals. That this disconnect is continuing through the current meltdown is beyond troubling.

To heck with December. That’s last year’s news. The incredibly short-term good news for the economy is that January has five fridays, and therefore many of us are going to see an extra paycheck this month. Mortgage and credit companies are going to have a less crappy month, and their CEO’s will be able to give themselves nice bonuses with the windfall. February? Too far off to worry about.

I’ve been using the word depression to describe this for nearly a year now.

If the New Deal were still operative, this would have never happened, but let’s face it, every economic precondition that was there in 1929 was there in late 2007 (when this depression started, though nobody realized it):

Excessive speculation in investments by a general public generally ignorant of their risks: Check.
Corrupt, fraudulent sales practices in selling such investments to the general public, as well as institutional investors: Check.
Fraudulent accounting to cover for excessive amount of risk carried on the books of banks and/or brokerages in such securities check: Check.
Negligent or nonexistent risk management by said banks and/or brokerages to minimize risk of said securities, and to understand said risks: Check.

Negligent or nonexistent attempt by government regulators to understand risks of systemic problems in the banking and brokerage industries: Check.
Negligent or nonexistent action by government regulators to prevent banks and/or brokerages from exposing the economic to broad financial risk: Check.

In 1929, it was margin risk and securities speculation on Wall Street. In 2007, it was mortgage speculation, and speculation in the derivative securities built upon them. Other than that, there is no difference.

Then it was the Hoover Administration, now its Bush’s watch. Let’s just pray Obama is another FDR, or this could get a lot uglier than it is already.

Personally, I believe it’s going to be a brutal 2009. It will still be a hard 2010, with a few signs of life in the periphery. I really don’t expect a broad recovery that people will really feel until 2011.

There’s just too much shit to work through the system, and believe it or not, the bloodletting in the broader economy has really just begun.